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Interview

with M.A. Pathan, Chairman, Tata Petrodyne Limited

04.11.2010 / Energyboardroom

When most people hear the name TATA internationally, their first thought is of TATA Automotive. Currently, there is relatively little association in people’s minds between TATA and the Oil and Gas industry. How do you build synergies between TATA Petrodyne and the TATA Group, and how do you integrate your activities with the activities of the group at large ?

As you are aware, the TATA Group is the largest private conglomerate in the country. If you look at the Group’s present turnover, it is around $ 74 billion and it has about 95 operating companies under its fold in practically every field, from Salt to Steel. As I was informed someone said, (this is going back to the years when Air India was owned by TATA) he was travelling to Mumbai by Air India; when he arrived at the airport, he ordered for a car which was produced by TATA Motors; he checked in at the hotel Taj Mahal owned by Indian Hotels of the TATAs; in his bed room there was an Air conditioner of Voltas manufactured by a TATA Company; he was served a cup of tea from TATA Tea and so on!!

Tata Petrodyne Ltd. (TPL) is a TATA group company, engaged in the exploration & production of crude oil and natural gas. The company was incorporated on 7th Jan. 1993. TPL is a 100% subsidiary of TATA Sons Ltd., the premiere holding company of the Group. TATA Industries Ltd originally promoted TPL with the objective of spearheading the groups foray into the upstream sector of the Oil & Gas industry.

Ownership of the company (TPL) changed with its acquisition by TATA Power Company Ltd. in line with the Group’s strategy to consolidate all its energy businesses into a single Corporate entity. Subsequently, considering the very nature of Oil & Gas business which requires focus and large investment, the parent company of the Group i.e. TATA Sons Ltd. bought over TATA Power’s 100 % stake in TPL. The Company has a highly skilled technical team and has developed adequate technical capabilities by installing workstations and procuring advance software licences related to G&G work.

An essential element of the TATA value system is commitment to the community. What comes from people goes back to the people many times over. This means, we work hard and wisely to generate wealth and then use it to enrich and improve the lives of the communities in which we live and work. This is a sacred duty ingrained in the TATA Group from its inception.

What have been the main achievements of Tata Petrodyne Ltd. since you joined the company in 2003?

Tata Petrodyne Ltd. has since 1994 participated in various rounds of bidding conducted by the Govt. of India, and today has participating interest in 7 Indian Oil & Gas Blocks, won in earlier from pre-NELP & NELP bid rounds. The operators of these 7 blocks are companies of international repute and standing in the business with a high degree of success in Oil & Gas exploration. Out of these 7 blocks, 3 blocks are under production/ development and the balance 4 are in various stages of exploration.

In March 2007, Tata Petrodyne Ltd. made its 1st international venture by farming into Gas bearing blocks in North Sea in a consortium and have also been awarded an adjacent block in 2009.

In 2009 the company attained “Operator” status after being granted an exploration permit for an off-shore shallow water block in Australia in which it now has 100% participating interest.

Indeed, it seems you are actively expanding abroad – but let us focus, for a moment, on India. What are your expectations for the upcoming 9th round of NELP? Are you willing to increase your participation in India, and acquire more blocks ?

We would certainly like to do that but it all depends on the profitability of the blocks that are offered. At the same time, we have also to find assets that match our investment criteria.

Many people talk about the successes of the NELP policy – after more than 10 years, more than 200 blocks have been awarded. But we have also heard many critics assert that even though the bidding is officially open to any player, the way that the awards are given favour larger, more established companies – especially the major state-owned players. In India, we do not see, for example, as many international O&G companies as in other markets; and the industry is primarily concentrated around these few large corporations. Do you feel that there are challenges, in India, for other players to start operating ? Or do you feel that the environment is favourable for all?

If you look at the NELP track record, initially you find that there were not many players participating. The government kept on improving the offer conditions and revising the policies from time to time thereby making it favourable for the bidders. As a result, if you look at the 6th and 7th rounds – which were the most successful rounds in terms of bidding and awards – you had not only Indian players bidding for it, but also major international players as well. In fact, even in the 5th round, we saw the start of more diversified bidding.

The changes that allowed this to take place were, A) the growing confidence of the international players in the fairness and attractiveness of the NELP policy; B) growing confidence regarding the future of oil in India based on the track record; and C) focus of multinationals towards India being one of the fastest-developing countries.

As energy demand grows and grows in India, many Indian E&P players are looking abroad. How would you frame the main guidelines of the internationalization process for Tata Petrodyne Ltd.?

The Government’s strategy is to endeavour towards meeting the energy demand for the ambitious sustained GDP growth of over 8% envisaged in the next decade. India is highly dependent on import of crude oil which will continue to increase in the foreseeable future. If you look at the refining plan, it is estimated that by 2012 the refinery capacity will go as high as 240 million metric tonnes. Today, we have a surplus refining capacity of over 40 million tonnes which has been created with a view to make India a refining hub.

Efforts have therefore to be made towards increasing the oil production within and obtaining equity oil outside India.

You have mentioned that Tata Petrodyne Ltd. has strong partnerships, both in India and abroad. What assets do you bring to the table ? How do you frame yourself as a partner of choice?

Don’t forget that Tata Petrodyne Ltd. represents the TATA Group. We bring an outstanding record in terms of pioneering success of the various Companies that the group has successfully developed.

Due mostly to the strength of its human resources, India is internationally known for a number of its industries – for example, IT and Pharmaceuticals. However, the Indian Oil & Gas industry is not yet considered on par with these other areas of trade; India is not yet considered an international O&G leader. What do you think is missing ? How can Indian O&G gain the same recognition as other leading Indian industries?

While the world may not fully view us as O&G leaders but in terms of fundamental capabilities, we are already quite advanced. Let me talk about the downstream sector. The main reason why we are not yet a leader is because in the downstream we have not gone aggressively beyond the shores of our country. Let me give you an example of our capability. In Trinidad and Tobago, during my tenure as Chairman of Indian Oil Corporation Ltd. (IOCL), we participated in the international bid for operation and maintenance of their refinery and succeeded in winning the contract against US multinational companies.

In Indian Oil, we have upgraded all our refineries by adopting state of the art technologies and adding secondary process units like Fluid Catalytic Cracking units, Hydrocracker, Diesel Hydro Desulpherisation, Delayed coker units. Today, distillate yield of all Indian refineries are at par with best refineries of the world. Later on, Reliance has built a refinery having highest capacity and with latest technologies. In Indian Oil, we have world class R&D facilities located at Faridabad, near Delhi where a number of world class lubricants have been developed. R&D of Indian Oil has also developed a process Technology “INDMAX” which upgrades heavy bottoms into distillates and also produces higher percentage of LPG.

You will thus notice that we are capable of achieving recognition as a leading Industry in Oil and gas sector.

On a personal note, you have a wide experience: you were chairman of IOCL, as well as Petrofed. What brought you here to Tata?

After completing my tenure with Indian Oil, I decided that I would not take up any assignment where I may be required to work against the interest of IOC – because IOC is in my blood !! I got some offers from oil companies which I politely declined as I did not wish to compromise on my principles.

I was then approached by Mr. Tata for taking up an assignment as a Group Resident Director posted at Delhi which I readily accepted. It was an honour for me to be the face of the TATA Group companies in Delhi. I am, therefore, fortunate to have served two most prestigious organizations i.e. Indian Oil and the TATA Group, which is the largest private conglomerate of the country.

Do you have a final message for the readers of Oil & Gas Financial Journal, on behalf of Tata Petrodyne Ltd.?

I think India offers tremendous opportunities. If you look at the current picture, there are many players here. I was invited to give a talk at Oxford, and my concluding remarks were that over the years, several national and international entities have entered the Indian O&G space and have continued to strengthen their position. Considering the rate of growth of the Indian economy and the O&G potential in the country, more players are welcome.

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